[Federal Register: October 6, 2004 (Volume 69, Number 193)]
[Rules and Regulations]
[Page 59761-59763]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06oc04-1]
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Rules and Regulations
Federal Register
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[[Page 59761]]
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 591
RIN 3206-AK29
Cost-of-Living Allowances (Nonforeign Areas); Methodology Changes
AGENCY: Office of Personnel Management.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Office of Personnel Management (OPM) is making technical
changes in the methodology used to determine nonforeign area cost-of-
living allowances (COLAs). The changes correct minor drafting errors;
provide consistent treatment of sale prices; allow the use of non-
housing price data collected on St. John, U.S. Virgin Islands; correct
and clarify the definition of survey areas; and allow a one-time
prospective index adjustment for the Caribbean and Alaska areas
concurrent with the effective date of any COLA rate changes resulting
from the 2004 Pacific COLA surveys. OPM is making these changes in
large part as the result of experience gained in recent COLA surveys
and upon the recommendation of several groups established to assist us
in administering the COLA program.
DATES: Effective November 5, 2004.
FOR FURTHER INFORMATION CONTACT: Donald L. Paquin, (202) 606-2838; fax:
(202) 606-4264; or e-mail:COLA@opm.gov.
SUPPLEMENTARY INFORMATION: Section 5941 of title 5, United States Code,
authorizes the payment of cost-of-living allowances (COLAs) to
employees of the Federal Government stationed in certain nonforeign
areas outside the contiguous 48 States whose rates of basic pay are
fixed by statute. Executive Order 10000, as amended, delegates to the
Office of Personnel Management (OPM) the authority to administer
nonforeign area COLAs and prescribes certain operational features of
the program.
The Government pays nonforeign area COLAs to General Schedule, U.S.
Postal Service, and certain other Federal employees in Alaska, Hawaii,
Guam and the Commonwealth of the Northern Mariana Islands (CNMI),
Puerto Rico, and the U.S. Virgin Islands. OPM conducts COLA surveys in
each allowance area to determine whether, and to what extent, local
living costs are higher than those in the Washington, DC, area. OPM
sets the COLA rate for each area based on the results of these surveys.
On February 9, 2004, OPM published proposed regulatory changes in
the Federal Register (69 FR 6020) which would (1) correct minor
drafting errors; (2) provide consistent treatment of sale prices; (3)
allow the use of non-housing price data collected on St. John, U.S.
Virgin Islands; (4) correct and clarify the definition of the survey
areas; and (5) allow a one-time prospective index adjustment for the
Caribbean and Alaska areas concurrent with the effective date of any
COLA rate changes resulting from the 2004 Pacific COLA surveys. We
received six comments on these proposed changes.
One comment was from members of the Hilo COLA Advisory Committee
(CAC). Prior to each survey, OPM establishes CACs in each survey area
to advise OPM on the COLA surveys and other issues relating to the
administration of the COLA program. The Hilo CAC noted that the
definition of the Hilo, Hawaii, survey area (which was stated as the
``City of Hilo'') was incorrect because Hilo is not a municipality.
Therefore, OPM is changing the survey area name to the ``Hilo area.''
Another comment was from members of the Kailua Kona CAC who
recommend that the Kailua Kona survey area be expanded to include
Waimea and Waikoloa areas. OPM agreed to survey these areas on a test
basis in the 2004 survey to determine the feasibility of expanding the
survey area. OPM found that it was feasible to do so and agrees with
the recommendation to expand the survey area. To reflect this change,
OPM is changing the name of the survey area to the ``Kailua Kona/Waimea
area,'' which includes Waikoloa.
A third comment was from a member of the Survey Implementation
Committee, established pursuant to the settlement in Caraballo, et al.
v. United States, No. 1997-0027 (D.V.I.), August 17, 2000. The
commenter recommended that OPM no longer collect housing data in
eastern Puerto Rico because of the closing of Roosevelt Roads Naval
Station. The commenter suggested that OPM consider surveying other
areas in Puerto Rico. We agree that OPM may need to revise the areas in
which it collects housing data in Puerto Rico. Therefore, we have
removed the reference to eastern Puerto Rico from the Survey Area table
in 5 CFR 591.215, removed a similar reference from Sec. 591.219(b),
and allowed for the collection of housing data in other areas in Puerto
Rico with significant Federal employment.
Another member of the Survey Implementation Committee recommended
that we clarify the exception in Sec. 591.219(b), which concerns the
use of housing data collected in eastern Puerto Rico and in St. John.
The commenter recommended that the exception state that OPM combines
housing data collected for St. John with the data collected for St.
Thomas to produce indexes for the St. Thomas/St. John survey area. We
agree that the exception in Sec. 591.219(b) may have been confusing
and have concluded that it is no longer needed. OPM analyzes the data
it collects in St. Thomas/St. John in the same manner as the data it
collects in Fairbanks/North Pole, Kailua Kona/Waimea, and other survey
areas with multiple locations. Therefore, there is no exception
applicable to St. John.
A fifth commenter requested that OPM revise the proposed change in
the definition of ``Washington, DC, area or DC area'' in Sec. 591.201
to state exactly the situations the change will affect or cite the
parts or subparts to which the revised definition applies. OPM proposed
changing the definition of several survey areas to address the need to
survey certain items on an exception basis in locations beyond the
local jurisdiction. With one exception, the proposed definitional
changes were limited to Sec. 591.215(a), which lists the survey areas.
The exception is the Washington, DC, area, which is defined in Sec.
591.201 and listed again with the other survey areas in Sec.
591.215(a).
[[Page 59762]]
Because the purpose of Sec. 591.201 is to define terms that OPM
uses throughout subpart B, we believe it would be impractical to cite
within the definition of the ``Washington, DC, area or DC area'' each
section where the term is used. OPM also believes it would be
impractical to state exactly which situations (i.e., items and
locations) the expanded definition addresses. Survey items change from
one survey to the next, in large part based on CAC recommendations.
From experience OPM has learned that it sometimes must survey items,
such as golf, snow skiing, and air travel, in areas beyond the local
jurisdictions listed in the table in Sec. 591.215(a). Therefore, OPM
proposed expanding several of those areas on an exception basis. The
proposed change lists golf, snow skiing, and air travel as examples
because setting in regulation exactly which items OPM can survey
outside a jurisdiction would be overly restrictive and would weaken
OPM's ability to accommodate CAC suggestions. Therefore, we are not
adopting the commenter's suggestion, but we are making additional
changes in the title and column headings in the table in Sec.
591.215(a) to further clarify survey area definitions.
Before each survey, OPM consults with the local CACs concerning
item selection, including any items we might survey outside local
jurisdictions. We also include a list of the items surveyed in the
survey reports we publish for comment in the Federal Register. The item
descriptions identify which items OPM surveyed beyond local
jurisdictions.
The sixth commenter stated that Federal employees should not
receive COLA increases. The commenter noted the high cost of living in
the Washington, DC, area and stated that she did not believe Federal
employees in other areas needed to receive more than employees in the
DC area. OPM notes that section 5941 of title 5, United States Code,
and Executive Order 10000 require the Federal Government to pay COLAs
to Federal employees in areas outside the contiguous 48 States where
living costs are substantially higher than in Washington, DC. Under
this authority, OPM sets COLA rates after surveying and comparing
living costs in the COLA areas and the DC area.
Executive Order 12866, Regulatory Review
This rule has been reviewed by the Office of Management and Budget
in accordance with Executive Order 12866.
Regulatory Flexibility Act
I certify that these regulations will not have a significant
economic impact on a substantial number of small entities because they
will affect only Federal agencies and employees.
List of Subjects in 5 CFR Part 591
Government employees, Travel and transportation expenses, Wages.
Office of Personnel Management.
Kay Coles James,
Director.
0
Accordingly, the Office of Personnel Management amends subpart B of 5
CFR part 591 as follows:
PART 591--ALLOWANCES AND DIFFERENTIALS
Subpart B--Cost-of-Living Allowance and Post Differential--
Nonforeign Areas
0
1. The authority citation for subpart B of 5 CFR part 591 continues to
read as follows:
Authority: 5 U.S.C. 5941; E.O. 10000, 3 CFR, 1943-1948 Comp., p.
792; and E.O. 12510, 3 CFR, 1985 Comp., p. 338.
0
2. In Sec. 591.201, revise the definition of ``Washington, DC, area or
DC area'' to read as follows:
Sec. 591.201 Definitions.
* * * * *
Washington, DC, area or DC area means the District of Columbia;
Montgomery County, MD; Prince Georges County, MD; Arlington County, VA;
Fairfax County, VA; Prince William County, VA; and the independent
cities of Alexandria, Fairfax, Falls Church, Manassas, and Manassas
Park, Virginia; and in the context of certain survey items, includes
additional geographic locations beyond these jurisdictions.
0
3. In Sec. 591.213, revise paragraph (b)(1) to read as follows:
Sec. 591.213 What prices does OPM collect?
* * * * *
(b) * * *
(1) OPM does not collect coupon prices, clearance prices, going-
out-of-business prices, or area-wide distress sale prices.
* * * * *
0
4. In Sec. 591.215, revise paragraph (a) to read as follows:
Sec. 591.215 Where does OPM collect prices in the COLA and DC areas?
(a) Survey areas. Each COLA area has one survey area, except Hawaii
County, HI, and the U.S. Virgin Islands COLA areas. Hawaii County has
two survey areas: the Hilo area and the Kailua Kona/Waimea area. The
U.S. Virgin Islands also has two survey areas: the Island of St. Croix
and the Islands of St. Thomas and St. John. The Washington, DC, area
has three survey areas: the District of Columbia, the Maryland suburbs
of the District of Columbia, and the Virginia suburbs of the District
of Columbia. OPM collects non-housing data throughout the survey area,
and for selected items such as golf, snow skiing, and air travel, OPM
collects non-housing data in additional geographic locations. OPM may
collect housing data throughout the survey area or in specific housing
data collection areas. The following table shows the survey areas:
Survey Areas
------------------------------------------------------------------------
Survey areas and geographic
COLA and reference areas coverage
------------------------------------------------------------------------
Anchorage.............................. City of Anchorage.\1\
Fairbanks.............................. Fairbanks/North Pole area.\1\
Juneau................................. Juneau/Mendenhall/Douglas
area.\1\
Rest of Alaska......................... See paragraph (c) of this
section.
Honolulu............................... City and County of Honolulu.
Hawaii County.......................... Hilo area.\1\
Kailua Kona/Waimea area.
Kauai.................................. Kauai Island.
Maui................................... Maui Island.
Guam & CNMI............................ Guam.
Puerto Rico............................ San Juan/Caguas area.\2\
U.S. Virgin Islands.................... St. Croix.
St. Thomas/St. John area.\3\
Washington, DC-DC...................... District of Columbia.\1\
[[Page 59763]]
Washington, DC-MD...................... Montgomery County and Prince
Georges County.\1\
Washington, DC-VA...................... Arlington County, Fairfax
County, Prince William County,
City of Alexandria, City of
Fairfax, City of Falls Church,
City of Manassas, and City of
Manassas Park.\1\
------------------------------------------------------------------------
\1\ For selected items, such as golf, snow skiing, and air travel, these
survey areas may include additional geographic locations beyond these
jurisdictions.
\2\ OPM may collect housing data in other areas in Puerto Rico that have
a significant concentration of Federal employees stationed in those
areas.
\3\ OPM collects housing data in St. John. OPM also may collect non-
housing data from selected outlets in St. John.
* * * * *
0
5. In Sec. 591.216, revise paragraph (b) to read as follows:
Sec. 591.216 How does OPM combine survey data for the DC area and for
COLA areas with multiple survey areas?
* * * * *
(b) COLA areas with multiple survey areas. OPM computes weighted
average indexes at the item, PEG, MEG, and/or overall level by using
the corresponding indexes and Federal employment weights from each
survey area within the COLA area.
0
6. In Sec. 591.219, revise paragraph (b) to read as follows:
Sec. 591.219 How does OPM compute shelter price indexes?
* * * * *
(b) OPM then uses these characteristics and rental prices and/or
estimates in hedonic regressions (a type of multiple regression) to
compute for each COLA survey area the price index for rental and/or
rental equivalent units of comparable quality and size between the COLA
survey area and the Washington, DC, area.
0
7. In Sec. 591.222, revise paragraph (c) to read as follows:
Sec. 591.222 How does OPM use the expenditure weights to combine
price indexes?
* * * * *
(c) Step 3. OPM repeats the process described in Step 2 at each
level of aggregation within the PEG to produce a price index for the
PEG, at the PEG level to produce an index for the MEG, and at the MEG
level to produce the overall price index for the COLA area.
0
8. In Sec. 591.224, revise paragraph (b) and add paragraph (c) to read
as follows:
Sec. 591.224 How does OPM adjust price indexes between surveys?
* * * * *
(b) Paragraph (a) of this section applies beginning with the
effective date of the results of the 2005 survey conducted in Puerto
Rico and the U.S. Virgin Islands.
(c) Based on additional housing data that may be collected before
the 2005 survey conducted in Puerto Rico and the U.S. Virgin Islands,
OPM will adjust as warranted the price indexes and COLA rates for
Puerto Rico, the U.S. Virgin Islands, and the COLA areas in the State
of Alaska. OPM will implement any such adjustments on a one-time basis
on the effective date of the results of the 2004 surveys conducted in
Hawaii and Guam/CNMI, and subject to Sec. 591.228. OPM will publish
such adjustments as provided in Sec. 591.229.
[FR Doc. 04-22531 Filed 10-5-04; 8:45 am]
BILLING CODE 6325-39-P